The Central Bank says it expects the economy to contract by 4.7% this year. The country continues to be impacted by global recession and falling demand in what the bank called 'an exceptionally difficult period for the Irish economy.'
In its latest economic forecast - the first of 2009 - the Central Bank says the contraction will lead to significant job losses with 100,000 fewer people working at the end of the year.
The bank also says that unpalatable short term measures are needed if the economy is to stabilise in 2010.
The Central Bank says that GNP will slow by 4.7% in 2009, while GDP will contract by 4%. This compares to estimated figures of negative GNP growth of 2.6% for 2008 and negative GDP growth of 1% for 2008.
The figures are a marked slowdown from the GNP growth of 4.1% seen in 2007, while GDP growth registered 6% then.
The Central Bank also says that consumer spending will slow by 2.5% this year while inflation will fall to an average rate of -1.9%
Today's economic prediction from the Central Bank is one of the more negative outlooks for the country so far. The contraction in the economy this year will more than cancel out growth the economy enjoyed in the boom year of 2007.
'We are in an exceptionally difficult period for the Irish economy,' commented Central Bank Governor John Hurley as he published today's economic bulletin.
'Our forecasts published today indicate a further serious downturn in the coming year,' he added.
He said that to support a return to a more stable economic activity in the medium term, difficult decisions have to be taken and implemented now.
'In particular, it is vital that we move to correct the sizeable deficit in the public finances and that we improve our competitiveness position, which is all the more important in the light of the global downturn,' he said.
In the housing market, blamed for many of the country's current ills, the Central Bank says completions could fall to as low as 22,000 units this year compared to 52,000 last year.
Last year saw the first drop in employment in many years. The Central Bank says that trend is set to accelerate and assuming some emigration, unemployment is likely to average 9.4% of the labour force this year.
However, the bank also believes that Ireland has the potential to grow strongly again if productivity can be improved. But it adds that the potential is not a given and it warns that unpalatable measures are needed.
The bank says the largest item of Government expenditure - the public sector pay bill - is 'beyond the scope of current resources'. It says the public sector needs to use its purchasing power to drive hard bargains with the services sector.
It suggests reducing tax avoidance schemes, user charges for public services and it describes Ireland is unusual in not applying an annual residential property tax.
On an international front, the Central Bank predicts that the average price of a barrel of oil will be $51 in 2009. This compares to an average of almost $97 last year. It also says that the euro will trade in a range of €1.40 and 95 pence sterling over the next 12 months.
